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Best of Howard Stutz

Gaming Guru

Howard Stutz
 

Nevada gaming revenue dips, but positive note seen in slots

26 November 2014

LAS VEGAS -- Despite Nevada and the Strip’s third straight monthly gaming revenue decline — fueled by a more than 35 percent drop in baccarat totals — analysts found a bright spot in what was otherwise a dismal October.

After all, it is the start of the Thanksgiving holiday.

Statewide, casinos saw revenue fall almost 4.3 percent to $913.6 million during the month. On the Strip, gaming revenue fell 5.6 percent to $520.3 million. The Nevada State Gaming Control Board released the figures Wednesday.

The positive note came from slot machines.

Strip revenue from slots grew almost 7 percent during October to $260.6 million. Slot machine wagering of $3.5 billion during the month was an increase of 6 percent. Through the first 10 months of 2014, slot machine wagering is up 1.6 percent and revenue has increase less than 1 percent.

Analysts point to slot machine wagering as good barometer for the overall health of the casual Strip visitor.

Stifel Nicolaus Capital Markets gaming analyst Steven Wieczynski said he was encouraged by the back-story within October’s results, which included a 3 percent increase in total passenger counts at McCarran International Airport.

“At this point, we view the Las Vegas story as one heavily predicated on the ongoing mass market recovery,” Wieczynski said.

Much of the Strip’s decline was attributed to poor baccarat results. Revenue from the game was $97.3 million, a decline of 35.5 percent compared to the same month a year ago. The amount wagered on the game fell almost 15 percent, the second straight month of double digit declines in baccarat volume.

The October hold percentage on baccarat — the percentage of wagers retained by casinos — was 10.08 percent, down from 13.3 percent in October 2013.

Wieczynski said he still views the Strip’s baccarat business as “healthy,” despite the October decline that came during a month with a popular Chinese holiday.

“(Baccarat) has generated average monthly revenue of $134 million over the trailing 12-month period,” he said.

Without baccarat, Strip gaming revenue would have increased 5.6 percent.

“These results were mildly positive to us given growth in mass tables and slot machines,” said Macquarie Securities gaming analyst Chad Beynon.

Wells Fargo Securities gaming analyst Cameron McKnight said the Strip’s nongaming outlook has helped offset any gaming revenue declines.

Revenue per available hotel room — a nontraditional reporting figure — was up 6 percent in the third quarter. Las Vegas is also benefiting from a strengthening in the corporate meetings and conventions.

The statewide declines followed a 3.7 percent drip in August and a 6 percent dip in September. In those same time periods, Strip gaming revenue fell 6 percent in August and 12 percent in September.

For the first 10 months of 2014, state gaming revenue is down down 0.5 percent. Strip gaming revenue is down 0.1 percent.

Analysts say the Strip’s poor overall monthly total was not a surprise.

“We have been forecasting flat to down gaming revenue for the year and the fourth quarter specifically,” said Deutsche Bank gaming analyst Carlo Santarelli.

Clark County as a whole saw gaming revenue decline 6.2 percent, primarily due to double-digit decreases on the Boulder Strip (down 24.2 percent) and North Las Vegas (a 14.6 percent drop).

However, casinos in downtown Las Vegas reported a revenue increase of 1.2 percent in October.

The downtown Las Vegas market continues to benefit from strong Hawaiian tourism and recent renovations and new amenities,” Santarelli said.

The balance of Clark County, which includes casinos outside of Las Vegas and Henderson, saw revenue increase 2.4 percent.

Casinos in Washoe County saw gaming revenue climb almost 7 percent during the month, which included a 7.9 percent increase in Reno.

Gaming revenue in October associated with Internet poker was $665,000. October will be the last full month with three online wagering sites in Nevada after Ultimate Gaming ceased operations earlier this month.

Gaming taxes collected in November, based on October’s revenue, were $66.8 million, a 9.5 percent increase over the same period a year ago. For the first five months of the fiscal year, gaming revenue collections were up less than 1 percent.